Earth Heat Resources (ASX: EHR) has raised $600,000 from a placement of 20 million shares at $0.03 per share, which includes one free attaching option for every two shares purchased, with a 12 month term and exercisable at $0.06.
Proceeds will fund on-going overheads and activities associated with the company’s major projects including its Copahue Project in Argentina.
The funds will add to the project financing and direct investment won from Inter-American Development Bank (IDB), the largest funding agency in Latin American region, announced on November 25, 2011.
This investment represents an enormous vote of confidence in Earth Heat's Copahue Project, with project finance of up to US$134 million for the development and IDB to directly invest up to US$48 million as a lead investment.
The senior debt syndication process has kicked off with IDB in Washington, and has received a strong response with the book building process proceeding as planned.
The company is also making solid progress with additional project finance queries in Argentina, U.S., Middle East and parts of Asia, which could lead to the company being 100% funded.
Torey Marshall, Earth Heat's managing director, said “to bring fund managers onto our register in a meaningful sense is a very strong endorsement of what the company has achieved and where it is poised to go over the next 12 months."
"We see no problems at present ensuring full uptake of the US$134 million senior debt and have commenced the official process with the Inter-American Development bank in Washington DC. At this point in time it is fair to say that demand is very strong, which is a situation we hope continues through the next couple of months."
The IDB agreement will enable the final parts of the funding and feasibility processes to be undertaken with clear parameters.
Closing the initial phase of the financing in line with previously announced plans by Earth Heat, will be subject to the completion of a Bankable Feasibility Study and the meeting of all the requirements and covenants of the senior lenders.
The project would be consistent with the IDB's integrated strategy for climate change adaption and mitigation, and sustainable and renewable energy, which aims at increasing the bank's sustainable energy portfolio of 25% by the end of 2015.
About the Copahue project
Copahue comprises an identified initial 30 MW geothermal development with the potential for significant expansion and is anticipated to provide first power production and revenue within four years. Earth Heat has the right to earn up to 87.5% of the project by funding various stages of development.
The project area is located in the western part of Neuquén Province, around 300 kilometres from the provincial capital and just a few kilometres from the Chilean border.
The geothermal resource on which the project is based occurs on the North-East flank of the Copahue volcano a young, historically active stratovolcano whose summit is on the international border.
The project area has been the site of geothermal exploration and development activities since the 1970s, with work including a number of superficial and shallow exploratory surveys (geology, geochemistry, geophysics and temperature gradient drilling).
Four deep wells, reaching depths of 1,414 metres have also been drilled in the area, which has demonstrated the presence of a commercially exploitable, vapor-dominated geothermal reservoir within at least a part of the project area.
During 2011 Earth Heat has increased the resources by 150%, completed an EIA, a pre-Feasibility Study and most recently signed Letters of Intent for offtake of the power to be produced well in excess of stage 1 and 2 development.